Definition

The practice of manipulating earnings to reduce volatility and create the appearance of steady, predictable growth, because investors apparently can't handle reality. It's the financial equivalent of Instagram filters for your P&L.

Example Usage

The CFO used various reserve accounts to smooth earnings, ensuring no quarter looked too good or too bad, just consistently mediocre.

Origin

Accounting and financial reporting terminology from mid-20th century

Fun Fact

Income smoothing sits in a gray area between prudent reserve management and fraud, and that line moves based on how much the SEC cares that quarter.

Source: Financial reporting and earnings management terminology

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